Girish Gupta



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Trade With Mexico Looking Up While Country Continues to Look North
Apr. 1, 2011

Published by Minyanville

Following in the footsteps of Barack Obama who last week toured Latin America in an attempt to increase trade with the region, as well as ward off Chinese influence there,  British Deputy Prime Minister Nick Clegg found his way to Mexico to drum up UK exports to the country and the whole of Latin America.

Representatives accompanied Clegg from companies including BHP Billiton, Arup and Diageo (DEO). Britain has just a 1% share of Mexican imports and is keen to expand that. “I think I’m the first senior British politician to go to Mexico on a bilateral visit in over a decade,” Clegg said. “Frankly that tells you all you need to know and what a mistake it has been for our country to ignore this relationship.”

The two countries committed to doubling bilateral trade to $6.7 billion by 2015. A new British-Mexican business forum is to be set up alongside a Mexican Chamber of Commerce in London.

While Clegg impressed the Mexican Senate with his Spanish, back home he commands little respect. He is widely seen by Brits to have sold out in forming a coalition with the majority Conservative Party in elections last year.

Mexico is hoping to increase the competitiveness of its export sector, finance minister Ernesto Cordero told Reuters this week.  The minister recently suggested that growth in the country may exceed the 5.5% reported for 2010 -- the fastest in 10 years.

Cordero also said that tightening of US monetary policy is not likely soon, however, emerging economies such as Mexico must be prepared for when it does, perhaps later this year or by early 2012, he believes. Inflation has been slowed in Mexico thanks to lower interest rates in the US. This has led capital to flow into emerging markets, helping to strengthen their currencies and so calm inflation.

Further good news comes for President Felipe Calderón who has struggled since he began his leadership in December 2006 with the country’s war on drugs. Capital has been flying out of key industrial areas such as Monterrey thanks to the violence there. However, Ciudad Juárez, often described as the world’s most dangerous city, has actually seen investment rise over the last 12 months, despite an increase in the number of deaths there.

“"There is a certain fear from investors,” chairman of the Maquiladora Association (AMAC) Jose Armendariz Bailon told Al Jazeera, slightly understating the worries that businesses in the USA especially feel towards the notorious border city. “But [investors] see the other strengths we have, so investment hasn't been reduced”

The maquiladoras under his jurisdiction number roughly 330, employing about 187,000 workers. Growth in the sector rebounded to around 5% in 2010 after the global recession. The factories produce cars, electronics, chemicals and many other goods primarily to be exported north of the border. They have, however, been heavily criticized for their treatment of staff -- paid low wages and working in not only bad conditions but in danger when traveling to and from work.

US-Mexico relations remain tense. After the resignation last week of US Ambassador Carlos Pascual, “both governments must find a way to keep the wheels turning on a crippled but vital machine,” says Dudley Althaus in the Houston Chronicle. Replacing Pascual will be a difficult task. The candidate must have sufficient rank so as not to offend Mexican authorities but must also, frankly, want the difficult job. "The tone will go up and down, but things will keep working," said Andrew Selee, director of the Mexico Institute at the Woodrow Wilson Center,

In domestic political reshuffles, Attorney General Arturo Chávez has been replaced after a year and a half on the job. Tasked with fighting the drug violence that has tainted Calderón’s presidency, Chávez is being replaced by Marisela Morales, head of the organized crime unit of the prosecutor's office. Analysts do not believe that the appointment signifies a shift in Calderón’s strategy against the cartels, a worry for those keen to point out that more than 35,000 have died since he came into power just over four years ago.

The reason for the resignation may be related to Pascual’s similar fate. Both are thought to have been victims of publication of the WikiLeaks cables. The US described Chávez’s appointment as “totally unexpected and inexplicable.”

Mexico’s largest microfinance lender Compartamos is planning to acquire an 82.7% stake in Financiera Creditos Arequipa, a Peruvian lender for roughly $63m. "In Peru, we are witnessing a mature financial sector, as well as a potential market for group loans, which is currently underserved," executive president Carlos Labarthe said. The deal is expected to be finalized in the second quarter. The Mexican firm has said that it will not need to issue equity to finance the transaction.

Coca-Cola bottling giant Femsa (KOF) has signed a deal with Hewlett-Packard (HPQ) for technology outsourcing services. The deal cost the company $100 million and will last five years.


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© Girish Gupta